We all love a ‘How to’ article. When provided by a professional, an article of ‘Do’s and Don’ts’ assists us in navigating through technical aspects of our lives that we do not have the background in. As Simwealth we believe wealth and financial planning needs to be simple to be most effective. It is imperative to have the tools available to assist us in making sure that we create, grow and preserve wealth efficiently. This article looks at the everyday money habits that will work to your benefit and which ones will not. So Let’s start:
- DO Live below your means
We have probably heard this so many times that it may start sounding redundant. But, the truth of the matter is: if you don’t live below your means you simply cannot create wealth. It doesn’t matter how much money you make: if you spend more money than your receive then you will not be able to save/invest money for future needs. Disposable income is the holy grail of creation of wealth. The more money you have to invest/save, the more wealth you stand to make. In most instances disposable income becomes hard to save, but if you follow the 50/30/20 rule in your budget you will find it easier to manage.
- DO use Good debt & DON’T get into the trap of Bad debt
Yes, there is good debt. it may sound hard to believe, but there actually is good debt. Good debt is a debt that is associated with an asset that appreciates in value. Bad debt, on the other hand, is debt that is used to maintain a lifestyle. When you live beyond your means, it becomes easier to tap into credit facilities to maintain your lifestyle which has a detrimental effect on your finances over the long term. Whereas Good debt enhances your net worth and increases your probability of creating wealth.
- DON’T deny yourself a leisure budget
You’ve worked hard for your money, that means you should be able to enjoy it. Don’t deny yourself a budget that is inclusive of leisure and entertainment. What usually causes retreat from budgeting is the heavy constraints and limitations in your budget. Your budget needs to have flexibility for unforeseen circumstances and should definitely have space for leisure and entertainment.
- DON’T be intimidated by investing and saving
Investments are here to help you. They are envisioned to enhance your finances. It lets your money work for you. When you use the resources available to you in an efficient manner, this provides you with the opportunity to grow your wealth even more. The assistance of a professional such as a wealth manager, helps you grow your money without worrying yourself about the everyday processes of investing and saving money. At SimWealth we are of the belief that long term investing is the best way to make real wealth.
- DO plan for your goals and objectives
We all have goals and dreams, objectives and aspirations. With no planning these plans will generally not coming into reality. Planning allows you to decisively make decisions that will work to the advantage of your finances. Through financial planning your goals are matched to a strategy. These strategies will assist you in implementing a plan that will work to your advantage. Matching your goals to a plan of action increases the chances of achieving them.
The do’s and don’t are the fundamentals of managing your personal finances. When done appropriately you will have a disposable income that can reduce bad and increase assets. The intent is to help you achieve your goals and aspirations in the most simple way possible.